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Tullow Oil sells stake in Uganda's oil fields to CNOOC for $2.5 billion news
05 February 2010

The UK's largest independent oil and gas explorer Tullow Oil has sold a stake in its Uganda's oil fields to China National Offshore Oil Corporation (CNOOC), China's third-largest oil company, for $2.5 billion.

The deal is expected to be signed late today in London, The Wall Street Journal reported today.

Heritage Oil, an independent oil and gas exploration company, had struck a deal in November to sell its 50 per cent stake in Blocks 1 and 3A of the oil-rich Lake Albert Basin in Uganda to Italy's largest oil and gas company Eni S.p.A for $1.5 billion. (See: Heritage Oil to sell its Ugandan oil blocks to Eni for $1.5 billion)

Tullow, which is Heritage's partner in the oil fields and said it had the preemption right and Heritage could not sell its stake without giving it the first right of purchase.

After hectic lobbying by Heritage, Eni and Tullow with the Ugandan government, Uganda's minister of state for mineral development Peter Lokeris said on Wednesday that Tullow had the right to acquire the fields and its order was final.

Last month, Tullow had placed over 80 million new ordinary shares at 1,150 pence per share to raise around 925 million to fund the development of its Ugandan and Ghana operations

Tullow, which will now be the sole owner of all the major oil fields in Uganda, had said earlier that it would immediately sell half of the stake either to Cnooc or Total of France in order to develop the oil fields if it gets Heritage's stake.

Since the discovery of field in 2007, six wells have been drilled in Blocks 1 and 3A by Tullow and Heritage and appraisal wells confirmed that fields hold approximately 1 billion barrels of oil.

But due to high cost involved in developing the fields and the related infrastructure, Heritage had put its stake for sale this summer.

The project required huge investments to build a 1,200 kilometre pipeline to the Kenyan port of Mombassa to export the oil as well as building a refinery.

For CNOOC, which has assigned a capital and exploratory budget of $7.93 billion for 2010 and having access to almost unlimited funding arranged by its financing subsidiary, has secured huge reserves, which will keep China's economy rolling after Beijing had given the green signal last year to its state-owned oil and mining companies to secure assets abroad, especially in Australia and Africa.

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Tullow Oil sells stake in Uganda's oil fields to CNOOC for $2.5 billion